Taxpayer Is Not A Citizen – Not Subject To Federal Income Tax Requirements?
Taxpayer Is Not A Citizen – The Law Behind Federal Income Taxes And Some Relevant Case Laws.
Some individuals argue that they have rejected citizenship in the United States in favor of state citizenship; therefore, they are relieved of their federal income tax obligations. A variation of this argument is that a person is a free born citizen of a particular state and thus was never a citizen of the United States. The underlying theme of these arguments is the same: the person is not a United States citizen and is not subject to federal tax laws because only United States citizens are subject to these laws.The Law: The Fourteenth Amendment to the United States Constitution defines the basis for United States citizenship, stating that “[a]ll persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.” The Fourteenth Amendment therefore establishes simultaneous state and federal citizenship. Claims that individuals are not citizens of the United States but are solely citizens of a sovereign state and not subject to federal taxation have been uniformly rejected by the courts. The IRS issued Revenue Ruling 2007-22, 2007-14 I.R.B. 866, warning taxpayers of the consequences of making this frivolous argument.In April 2005, a federal district court in Georgia permanently barred Jonathan D. Luman blocking him from selling his “Tax Buster” program that was based on the false theory that customers can avoid paying tax by renouncing their Social Security numbers and becoming sovereign citizens.In September 2006, a federal district court in California permanently barred James L. Tolbert from preparing income tax returns for others, because he promoted a fraudulent tax scheme based on the frivolous theory, among others, that state residents are not liable for federal income tax since they are citizens of the state and not of the United States.In January 2006, Lynn N. Ealy was sentenced in federal district court to 27 months imprisonment for his conviction on three counts of federal income tax evasion and ordered to pay restitution of $84,174 to the IRS. The evidence against Mr. Ealy demonstrated various affirmative acts of evasion, including the fact that he claimed he was not a citizen of the United States and the tax laws were unconstitutional. See 2006 TNT 18- 48 (Jan. 12, 2006).In September 2006, a California federal district court barred James L. Tolbert from preparing federal tax returns. Tolbert promoted a tax avoidance scheme representing, among other things, that residents ofCalifornia or other states are not liable for federal income tax because they are citizens of California (or other state) and not the United States, and that American citizens working in the United States need not file federal income returns because “compensation for labor” is totally differentin meaning and in law from “income.”In May 2009, a Connecticut federal district court judge granted the government’s motion for a permanent injunction against Deowraj Buddhu and Sunita Buddhu, precluding them from: preparing or assisting in preparing federal tax returns; representing customers before the Internal Revenue Service; owning, working for, or volunteering for tax-return preparation businesses; and promoting tax-fraud schemes. Sunita Buddhu and her father Deowraj Buddhu had operated a tax return preparation business in which they advised their clients that the IRS does not have authorization or jurisdiction to conduct examination of Connecticut residents’ tax returns.
Relevant Case Law:
United States v. Hilgeford, 7 F.3d 1340, 1342 (7th Cir. 1993) – the court rejected “shop worn” argument that defendant is a citizen of the “Indiana State Republic” and therefore an alien beyond the jurisdictional reach of the federal courts.United States v. Sileven, 985 F.2d 962 (8th Cir. 1993) – the court rejected the argument that the district court lacked jurisdiction because the taxpayer was not a federal citizen as “plainly frivolous.”United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993), cert. denied, 510 U.S. 1193 (1994) – the court rejected the Gerads’ contention that they were “not citizens of the United States, but rather ‘Free Citizens of the Republic of Minnesota’ and, consequently, not subject to taxation” and imposed sanctions “for bringing this frivolous appeal based on discredited, tax-protester arguments.”United States v. Sloan, 939 F.2d 499, 500 (7th Cir. 1991), cert. denied, 502 U.S. 1060, reh’g denied, 503 U.S. 953 (1992) – the court affirmed a tax evasion conviction and rejected Sloan’s argument that the federal tax laws did not apply to him because he was a “freeborn, natural individual, a citizen of the State of Indiana, and a ‘master’ – not ‘servant’ – of his government.”United States v. Ward, 833 F.2d 1538, 1539 (11th Cir. 1987), cert. denied, 485 U.S. 1022 (1988) – the court found Ward’s contention that he was not an “individual” located within the jurisdiction of the United States to be “utterly without merit” and affirmed his conviction for tax evasion. O’Driscoll v. IRS, 1991 U.S. Dist. LEXIS 9829, at *5-6 (E.D. Pa. 1991) – the court stated, “despite [taxpayer’s] linguistic gymnastics, he is a citizen of both the United States and Pennsylvania, and liable for federal taxes.”Rice v. Commissioner, T.C. Memo. 2009-169, 98 T.C.M. (CCH) 40 (2009) – the court affirmed the imposition of a section 6702 frivolous return penalty against the taxpayer and rejected the taxpayer’s claim that he was not liable for income tax because he resided in the “American Republic ofGeorgia” and was not a United States citizen.Knittel v. Commissioner, T.C. Memo. 2009-149, 97 T.C.M. (CCH) 1837 (2009) – the court imposed a $7,500 section 6673 penalty against the taxpayer for asserting the frivolous argument (among others) that he was “not a United States person as defined in I.R.C. section 7701(a)(30).”Bland-Barclay v. Commissioner, T.C. Memo. 2002-20, 83 T.C.M. (CCH) 1119, 1121 (2002) – the court rejected taxpayers’ claim that they were exempt from the federal income tax laws due to their status as “citizens of the Maryland Republic,” characterized such arguments as “baseless and wholly without merit,” and required taxpayers to pay a $1,500 penalty for making frivolous arguments.Marsh v. Commissioner, T.C. Memo 2000-11, 79 T.C.M. (CCH) 1327, aff’d, 23 Fed. Appx. 874 (9th 2002), cert. denied, 537 U.S. 1029 (2002) – the court rejected the argument that the United States lacked legal standing to assess taxes because Marsh was a descendant from native Hawaiians. The court held that Marsh was a United States citizen subject to tax and not excluded as a purported member of the “Nation of Hawaii.”Solomon v. Commissioner, T.C. Memo. 1993-509, 66 T.C.M. (CCH) 1201, 1202-03 (1993), 42 F.3d 1391 (7th Cir. 1994) – the court rejected Solomon’s argument that as an Illinois resident his income was from outside the United States, stating “[he] attempts to argue an absurd proposition, essentially that the State of Illinois is not part of the United States. His hope is that he will find some semantic technicality which will render him exempt from Federal income tax, which applies generally to all U.S. citizens and residents. [His] arguments are no more than stale tax protester contentions long dismissed summarily by this Court and all other courts which have heard such contentions.”